• Specific order costing

• Job and batch costing concepts

• Characteristics of job costing
• Differentiate between job costing and batch costing
• Job Cost Sheet

Job and Batch Costing

• The specific order costing is an appropriate
technique or method for organization which
produces cost units which are separately
identifiable from each other.

• The specific order costing methods consist of

Job, Batch and Contract Costing.

Specific Order Costing

• Job costing is define as a form of specific order costing
to meet customer’s special requirements in which
normally complete within short duration. The work
usually carried out within a factory or supplier’s
premises or workshop as a continuously identifiable unit.
• Batch costing a number of items are being accumulated
together instead as a single item. These method is used
where a batch of identical units are manufactured.
• Service costing is a method used in service business or
used to cost service department services

Job, Batch and Service Costing Concepts

 Job and Batch Costing
Job costing Batch costing
• Individual products • Separate, readily identifiable group of
designed and produced product units which maintains its
for individual customers separate identify throughout the
• Production which may production process.
NOT held as inventory • Production to be held as inventory
until sold until sold
• Example plumbing work, • Products within each batch are
repairing work, tailoring, identical but separately identifiable.
catering Products between batches may vary
according to size, style, colour etc
• Example car manufacturing, printing
of cards, production of pens, pencils,
markers
Job Costing Flowchart
Direct Material Work–in- Finished
Direct Labour process Goods
Production Inventory
Overhead
Job 1
Job 2
• According to customer’s requirement
• Completed within short duration
• Completed at factory or workshop
• Accumulation of expenditure incurred
(material, labour and overhead) for each job
• Having a separate cost account or job cost sheet
for a separate job
• Each job is different from each other (unique)
because having their own characteristics

Characteristics Of Job Costing

Job Cost Sheet
Job Number : JLW 4495
RM
• Direct material cost xx
• Direct labour cost xx
• Direct expenses xx
• PRIME COST xxx
• Production overhead absorbed xx
• PRODUCTION COST xxx
• Non-production overhead xx
• Administration overhead xx
• Selling and distribution overhead xx
• TOTAL COST xxx
• Profit mark up or margin xx
• SELLING PRICE xxx
• To record all cost incurred for a job
• A source of information for estimating the
required cost for new job
• A basis to analyze cost
• A basis to determine selling price and
profit

Function Of Job Cost Sheet

• The objectives of business or company is to gain profit as
much as possible.
• The business has to estimate how much is the expected
profit to earn from the saleable product or job or services
rendered.
• The client or customer has a right to know how much the
selling price would be charged on the product and job
earlier before making decisions.
• Two method of estimation profit percentage are as follows:
i) Profit Mark Up
ii) Profit Margin

Profit Percentage on Job Costing

 • Profit is based on cost
• It could be either production cost or total cost
• Usually the selling price charged based on profit mark
up is lower than the profit margin because profit
charged is lower
• Example:
• Total Cost RM100,000
• Profit is 20% mark up
• Profit = 20/100 x RM100,000 = RM20,000
• Selling Price = Total cost + Profit
= RM100,000 + RM20,000
= RM120,000

Profit Mark-up
 • Profit is based on sales or selling price
• Usually the selling price charged based on profit margin is
higher than the profit mark up because profit charged is
higher.
• Example:
• Total Cost RM100,000
• Profit is 20% margin
• Profit = 20/80 x RM100,000 = RM25,000
• Selling Price = Total cost + Profit
= RM100,000 + RM25,000
= RM125,000

Profit Margin
• Batch costing a number of items are being
accumulated together instead as a single item.
These method is used where a batch of identical
units are manufactured.

• CIMA terminology defines a batch as a group of

similar articles which maintains its identity
throughout the production and it is treated as a
cost unit. Costs were accumulates as for job
costing in the batch cost card.

Batch Costing
• In order to identify the expenditure incurred on a job, a separate batch
cost card is established where each of the batch cost card is given for a
separate batch number.

• Batch cost card is a source document to record and summarize:

• Cost of material
• Cost of labour
• Production overhead costs
• Non production costs (admin, finance, selling and distribution)

• When the batch is completed, the cost per unit can be calculated by
dividing the total batch.
Cost per unit = Total Batch Cost
No. of unit in batch

Batch Cost Card